After reaching a record high in February, the S&P 500 dropped into correction in March as then-President Trump revealed his tariff strategy. As of Wednesday, the index remained 12.5% below its peak, with $6.5 trillion in market value erased since that high, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
While the market hit its lowest closing price on April 8, down 18.9% from its February peak, uncertainty remains. “The truth is: No one can know for sure” whether the market has bottomed.
History Offers Context, Not Certainty
According to Sam Stovall, chief investment strategist at CFRA Research, the S&P 500 has seen 24 corrections since WWII. When corrections didn’t morph into bear markets, it took an average of 133 days to bottom and 113 days to recover.
If April 8 proves to be the low, that would mean the market hit bottom in just 48 days, far faster than average. Similarly, the correction this year was confirmed in 22 days, versus the historical average of 77 days.
“Swift declines tend to be shallow and short-lived,” said Stovall. “History is a great guide, but it’s never gospel, so we’ll have to wait and see whether that will hold true.”
What makes this downturn different, he noted, is its origin: “The only problem is that this is what I call a manufactured correction, meaning that it started because Trump initiated a trade war.”
Will the Market Retest Its April 8 Low?
The S&P 500 closed at 4,982.77 on April 8. Some analysts, including Nick Colas, co-founder of DataTrek Research, believe the market may “retest” that low before establishing a bottom.
“In order for the April 8 lows to hold, investors must see enough of a trade policy shift to give them hope that the worst has passed,” Colas wrote.
He referenced October 1987, when the S&P 500 plummeted 20.5%, then rebounded, only to retest its lows in December. That retest ultimately proved to be the true bottom, followed by a 10.3% rally through year-end and a 16.5% gain in 1988.
Colas added that while not every market slump includes a retest, it’s “likely” this time given the high level of uncertainty.
Ed Yardeni, president of Yardeni Research, also sees a retest as probable. “If so, then the market may be forming a bottom,” he wrote.
V-Shaped Recovery? Analysts Are Not Convinced
In the 2023 correction, the S&P 500 bounced back within 24 days after bottoming on October 27. But this time, Adam Turnquist, chief technical strategist at LPL Financial, is skeptical.
He hasn’t seen key recovery indicators like a shift from defensive to cyclical stocks. “It’s still very defensive right now, which gave us pause in terms of calling for any type of V-shaped recovery,” Turnquist said. “In terms of history, more often than not, you tend to retest the lows.”
Still, he sees signs of cooling fear. The CBOE Volatility Index peaked on April 8, as did CNN’s Fear and Greed index.
Kim Abmeyer, certified financial planner and founder of Abmeyer Wealth Management, described the current market condition as a “grind sideways” phase: “What comes next is a grind sideways as we need to build a base to begin the next leg up.”
Critical Levels: 5,100 and 5,500
At Wednesday’s close, the S&P 500 was sitting at 5,376, according to Larry Tentarelli, founder of Blue Chip Daily Trend Report.
“Whichever level breaks first on a closing basis will likely signal the next leg of this move,” Tentarelli said, pointing to 5,100 and 5,500 as the crucial thresholds.
Meanwhile, bearish sentiment remains strong. For eight straight weeks, more than 50% of individual investors surveyed by the American Association of Individual Investors have been bearish.
Adding to the concern, on April 14, the S&P 500 saw a “death cross”, where the 50-day moving average fell below the 200-day moving average—a technical indicator that often signals further selling.
Patience Is Key for Investors
Timing a market bottom is incredibly difficult. But Yusuf Abugideiri, chief investment officer at Yeske Buie, emphasized the value of staying the course.
“The patient, disciplined, policy-based investor ultimately is going to be rewarded over the long run,” he said. “That’s the way the market makes you work for the returns. You’ve got to be patient; you’ve got to be disciplined.”
For younger investors, corrections represent buying opportunities. Those nearing retirement, Abugideiri advised, should focus on Treasuries and money market funds to add stability.
The key to the market’s future, he said, lies in clarity from the White House. “If investors get more clarity and have to deal with less uncertainty, markets are going to react favorably.”
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